Modifying Your Chapter 13 Bankruptcy

If you’re filing Chapter 13 bankruptcy then you know that it lasts three to five years, depending on your repayment plan. And you probably also know that a lot can happen in that time period. The good news is that change doesn’t have to derail your bankruptcy case. If your life takes a turn for the worse while in Chapter 13 bankruptcy, there are ways that you can modify your bankruptcy so that you can pay less.

Bankruptcy Modification Reasons

Some acceptable reasons for modifying your Chapter 13 bankruptcy repayment plan include:

• unexpected job loss
• big drop in income or big increase necessary expenses such as rent, food, and utilities
• family status change (divorce, marriage, birth, or adoption)
• household change (taking care of elderly or disabled relative)
• protracted illness which could include a permanent disability that prevents you from working
• incarceration

Depending on your finances, you may even be allowed to convert your case to a Chapter 7 bankruptcy.  However, modification is not always an available option, such as:

• Quitting your job because you want to avoid bankruptcy payments.
• You just want to save more money. Chapter 13 bankruptcy is designed to use all your disposable income to repay creditors.
• Purchasing luxury items (leasing a luxury vehicle or home). The bankruptcy trustee won’t allow you to reduce your plan payments so that you can purchase luxury items such as a high-end vehicle.
• Expenses that are already part of your budget, such as new tires or other car maintenance.  Your budget filed with the bankruptcy court should already account for regular car maintenance.

Potential Problems

No matter your financial troubles, there are certain debts you must repay—most taxes, child support, and your mortgage if you’re paying it through your Chapter 13 bankruptcy repayment plan.  If your current Chapter 13 bankruptcy plan only pays creditors the bare minimum, then modifying your plan to a lower payment won’t be an option.

Also keep in mind that if you get a big raise at work, land a better job, or otherwise experience a big improvement in your finances, the bankruptcy trustee may seek an upward modification of your plan payment. That means that the bankruptcy trustee may modify your plan so that you pay creditors more.

If you experience financial difficulties during your Chapter 13 bankruptcy, work with your Sacramento bankruptcy attorneyto modify your repayment plan so that it fits your budget and satisfies your creditors.